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Big news in oil industry: Chevron takes over Hess Corporation in a US$ 53 billion transaction

Tuesday, October 24th 2023 - 08:36 UTC
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Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share.

Chevron Corporation (NYSE: CVX) announced on Monday that it has entered into a definitive agreement with Hess Corporation (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at US$ 53 billion, or US$ 171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The total enterprise value, including debt, of the transaction is US$ 60 billion.

Back in the late nineties, Amerada Hess with other companies including Shell was involved in drilling for hydrocarbons offshore the Falkland Islands.

The acquisition of Hess upgrades and diversifies Chevron’s already advantaged portfolio. The Stabroek block in Guyana is an extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade. Hess’ Bakken assets add another leading U.S. shale position to Chevron’s DJ and Permian basin operations and further strengthen domestic energy security. The combined company is expected to grow production and free cash flow faster and for longer than Chevron’s current five-year guidance. In addition, John Hess is expected to join Chevron’s Board of Directors.

“This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets,” said Chevron Chairman and CEO Mike Wirth. “Importantly, our two companies have similar values and cultures, with a focus on operating safely and with integrity, attracting and developing the best people, making positive contributions to our communities and delivering higher returns and lower carbon.”

“Building on our track record of successful transactions, the addition of Hess is expected to extend further Chevron’s free cash flow growth,” said Pierre Breber, Chevron’s CFO. “With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases.”

“This strategic combination brings together two strong companies to create a premier integrated energy company,” CEO John Hess said. “I am proud of our people and what we have achieved as a company, which has one of the industry’s best growth portfolios including Guyana, the world’s largest oil discovery in the last 10 years, and the Bakken shale, where we are a leading oil and gas producer. Chevron has a world-class diversified portfolio of assets and one of the industry’s strongest balance sheets and cash return profiles. I believe our strategic combination creates a company that is stronger in every respect, with the leadership, asset portfolio and financial resources to lead us through the energy transition and deliver significant shareholder value for years to come.”

Transaction Benefits, Strong strategic fit:

Guyana – 30% ownership in more than 11 billion barrels of oil equivalent discovered recoverable resource with high cash margins per barrel, strong production growth outlook and potential exploration upside.

Bakken – 465,000 net acres of high-quality, long-duration inventory supported by the integrated assets of Hess Midstream.

Complementary Gulf of Mexico assets and steady free cash flow from Southeast Asia natural gas business.

The Chevron/Hess operation comes barely two weeks after another mega-acquisition by oil giant ExxonMobil, which announced it is buying Pioneer Natural resources for roughly US$ 60 billion.

Last year, Chevron posted a record profit of $35.5 billion, while Hess said its net profit stood at nearly $2.2 billion.

Categories: Energy & Oil, International.

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